Aerospace and defense company Redwire (NYSE: RDW) fell short of the market’s revenue expectations in Q2 CY2025, with sales falling 20.9% year on year to $61.76 million. On the other hand, the company’s full-year revenue guidance of $500 million at the midpoint came in 16.5% above analysts’ estimates. Its GAAP loss of $1.41 per share was significantly below analysts’ consensus estimates.

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“During the second quarter, we completed our acquisition of Edge Autonomy, establishing Redwire as an integrated global space and defense tech company specializing in multi-domain solutions,” stated Peter Cannito, Chairman and Chief Executive Officer of Redwire.

Company Overview

Based in Jacksonville, Florida, Redwire (NYSE: RDW) is a provider of systems and components used in space infrastructure.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Redwire’s sales grew at an incredible 88.5% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Redwire’s annualized revenue growth of 11.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Redwire missed Wall Street’s estimates and reported a rather uninspiring 20.9% year-on-year revenue decline, generating $61.76 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 130% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will spur better top-line performance.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Redwire’s high expenses have contributed to an average operating margin of negative 24.3% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, Redwire’s operating margin decreased by 34.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Redwire’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

Redwire’s operating margin was negative 149% this quarter largely due to a number of non-recurring expenses.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Redwire’s earnings losses deepened over the last four years as its EPS dropped 37% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Redwire’s low margin of safety could leave its stock price susceptible to large downswings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Redwire, its two-year annual EPS declines of 86.9% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q2, Redwire reported EPS at negative $1.41, down from negative $0.42 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Redwire’s full-year EPS of negative $3.25 will reach break even.

Key Takeaways from Redwire’s Q2 Results

Revenue and EBITDA missed significantly. Overall, this was a softer quarter. The stock traded down 26.9% to $10.01 immediately following the results.

Redwire underperformed this quarter, but does that create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.